FORM 10-QSB
FORM 10Q-SB
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: Act No. 33-4882-D
CLANCY SYSTEMS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Colorado 84-1027964
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
2250 S. Oneida #308, Denver, Colorado 80224
(Address of principal executive offices and Zip Code)
(303)753-0197
(Registrant's telephone number)
--------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
336,889,149 common shares were outstanding as of May 14, 1997.
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CLANCY SYSTEMS INTERNATIONAL, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Balance Sheet - September 30, 1996 and March 31, 1997 2 and 3
Income Statement - For the Three Months ended
March 31, 1996 and 1997 4
Income Statement - For the Six Months ended
March 31, 1996 and 1997 5
Statement of Stockholders' Equity - For the Six Months
Ended March 31, 1997 6
Statement of Cash Flows - For the Six Months Ended
March 31, 1996 and 1997 7
Notes to Unaudited Financial Statements 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION 10
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CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1996 and March 31, 1997
(Unaudited)
ASSETS
September March
-------- -----
Current assets:
Cash and cash equivalents $ 90,510 $ 145,263
Accounts receivable 286,931 334,276
Inventories (Note 2) 190,255 195,605
Investment in contract, net
(Note 4) 376,028 -
Income taxes refundable 720 720
Deferred tax asset (Note 3) 12,000 7,000
---------- --------
Total current assets 956,444 682,864
Furniture and equipment, at cost:
Office furniture and equipment 185,245 228,680
Equipment under service contracts 1,276,677 1,315,846
---------- ---------
1,461,922 1,544,526
Less accumulated depreciation 955,371 1,070,368
---------- ---------
Net furniture and equipment 506,551 474,158
Other assets:
Deposits and other 44,810 23,205
Software licenses 16,882 16,882
Software development costs 201,919 245,727
--------- --------
263,611 285,814
Less accumulated amortization 114,869 139,582
--------- --------
Net other assets 148,742 146,232
--------- --------
$1,611,737 $1,303,254
See accompanying notes.
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CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1996 and March 31, 1997
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
September March
-------- -----
Current liabilities:
Note payable - bank (Note 5) $ 393,000 $ 95,000
Accounts payable 15,046 -
Other accrued expenses 2,286 2,286
Warranty reserve 4,000 2,200
Deferred revenue 76,121 54,653
----------- ---------
Total current liabilities 490,453 154,139
Deferred tax liability (Note 3) 24,000 24,000
Stockholders' equity:
Preferred stock, $.0001 par value;
100,000,000 shares authorized,
none issued - -
Common stock, $.0001 par value;
800,000,000 shares authorized,
336,889,149 shares issued and
outstanding 33,689 33,689
Additional paid-in capital 1,030,674 1,030,674
Retained earnings 32,921 60,752
--------- ---------
Total stockholders' equity 1,097,284 1,125,115
--------- ---------
$1,611,737 $1,303,254
========== ==========
See accompanying notes.
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CLANCY SYSTEMS INTERNATIONAL, INC.
INCOME STATEMENT
For the Three Months Ended March 31, 1996 and 1997
(Unaudited)
1996 1997
---- ----
Revenues:
Sales $ 31,232 $ 53,740
Service contract income 255,288 246,291
Parking ticket collections (Note 4) - 25,985
--------- ---------
Total revenues 286,520 326,016
Costs and expenses:
Cost of sales 4,797 30,179
Cost of services 114,889 129,789
Cost of parking ticket collections
(Note 4) - 26,700
General and administrative 109,394 109,451
Research and development 10,648 13,008
--------- --------
Total costs and expenses 239,728 309,127
--------- --------
Income from operations 46,792 16,889
Other income (expense):
Interest income 1,849 381
Interest expense - (4,296)
--------- --------
Total other income (expense) 1,849 (3,915)
--------- --------
Income before provision for income taxes 48,641 12,974
Provision for income taxes (Note 3) 13,000 3,000
--------- --------
Net income $ 35,641 $ 9,974
========= =========
Net income per common share $ * $ *
========= =========
Weighted average number of shares
outstanding 336,900,000 336,900,000
=========== ===========
* less than $.01 per share
See accompanying notes.
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CLANCY SYSTEMS INTERNATIONAL, INC.
INCOME STATEMENT
For the Six Months Ended March 31, 1996 and 1997
(Unaudited)
1996 1997
---- ----
Revenues:
Sales $ 87,186 $ 70,018
Service contract income 456,750 534,878
Parking ticket collections (Note 4) - 265,295
--------- ---------
Total revenues 543,936 870,191
Costs and expenses:
Cost of sales 25,361 45,566
Cost of services 221,873 265,455
Cost of parking ticket collections
(Note 4) - 282,385
General and administrative 238,061 208,041
Research and development 27,976 19,291
Loss on disposal of fixed assets 4,552 -
-------- -------
Total costs and expenses 517,823 820,738
-------- -------
Income from operations 26,113 49,453
Other income (expense):
Interest income 3,210 810
Interest expense - (12,432)
-------- -------
Total other income (expense) 3,210 (11,622)
-------- ------
Income before provision for income taxes 29,323 37,831
Provision for income taxes (Note 3) 8,000 10,000
--------- ------
Net income $ 21,323 $ 27,831
========= ==========
Net income per common share $ * $ *
========= ==========
Weighted average number of shares
outstanding 336,900,000 336,900,000
=========== ===========
* less than $.01 per share
See accompanying notes.
-6-
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the Six Months Ended March 31, 1997
(Unaudited)
Additional
Common Stock paid-in Retained
Shares Amount capital earnings
----------------- --------- --------
Balance, September
30, 1996 336,889,149 $33,689 $1,030,674 $ 32,921
Net income for the
six months ended
March 31, 1997 - - - 27,831
----------- -------- ---------- --------
Balance March 31,
1997 336,889,149 $33,689 $1,030,674 $ 60,752
=========== ======= ========== ========
See accompanying notes.
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CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
For the Six Months Ended March 31, 1996 and 1997
(Unaudited)
1996 1997
---- ----
Cash flows from operating activities:
Net income $ 21,323 $ 27,831
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 119,084 330,254
Decrease in deferred revenue (17,953) (21,468)
Increase in accounts receivable (42,240) (47,345)
Increase in inventories (12,003 ) (5,350)
Decrease in income taxes refundable 11,280 -
Decrease in deferred tax asset 5,000 5,000
Increase in deferred tax liability 8,000 -
Increase in other current assets (3,690) -
Decrease in accounts payable and
accrued liabilities (1,300) (15,046)
Decrease in warranty reserve - (1,800)
Loss on disposal of fixed assets 4,552 -
------- -------
Total adjustments 70,730 244,245
------- -------
Net cash provided by operating activities 92,053 272,076
Cash flows from investing activities:
Acquisition of furniture and equipment,
software development costs and
patent costs (139,973) (126,412)
Investment in contract (575,000) -
Recovery of investment in contract - 185,484
Decrease (increase) in deposits and other (28,003) 21,605
-------- --------
Net cash provided by (used in) investing
activities (742,976) 80,677
--------- -------
Cash flows from financing activities:
Borrowings from bank 650,000 -
Repayment of notes payable - (298,000)
-------- --------
Net cash provided by (used in) financing
activities 650,000 (298,000)
-------- --------
Increase (decrease) in cash (923) 54,753
Cash at beginning of period 236,404 90,510
-------- -------
Cash at end of period $235,481 $145,263
-------- --------
See accompanying notes.
-8-
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 1997
1. Basis of presentation
The accompanying financial statements have been prepared by the Company,
without audit. In the opinion of management, the accompanying unaudited
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary for a fair presentation of the financial
position as of September 30, 1996 and March 31, 1997, and the results of
operations and cash flows for the periods ended March 31, 1996 and 1997.
Financial statement reclassifications:
Certain reclassifications have been made to the prior years' financial
statements to conform to the 1997 presentation.
2. Inventories
Inventories consist of the following at:
September 30, March 31,
1996 1997
------------- ----------
Finished goods $ - $ 9,780
Work in process 9,380 39,121
Purchased parts and supplies 180,875 146,704
--------- ---------
$190,25 $195,605
========= ========
3. Income taxes
The provision for income taxes for the quarter ended March 31, 1997 is
based on the expected tax rate for the year.
As of September 30, 1996 and March 31, 1997, total deferred tax assets
and liabilities are as follows:
September 30, March 31,
1996 1997
------------ ---------
Deferred tax assets $ 31,000 $ 31,000
Deferred tax assets resulting
from loss carryforward 10,000 10,000
Deferred tax liabilities (53,000) (58,000)
-------- --------
$(12,000) $(17,000)
======== =========
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CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 1997
4. Investment in contract
On February 15, 1996, the Company entered into a three year agreement with
the Town of Cicero, Illinois, whereby the Company issued all parking tickets
for the City and provided collection services for those parking tickets
issued and all outstanding parking tickets previously issued by the City.
As consideration, the Company received all cash receipts from tickets issued
and previously issued. The Company has paid a total of $750,000 for
commissions and amounts due to the Town. Amounts paid pursuant to
ncing April 1, 1996. Commencing April 1, 1996, the Company has maintained
a list of receivables of current and prior ticket issuances totaling
approximately $2,500,000. The receivables are not reflected on the Company's
financial statements until the amounts are collected.
Effective December 5, 1996, the contract with the Town of Cicero was
terminated.
In January of 1997, the Company received $185,484 from the Town of Cicero
representing a prorated refund of the initial contract costs paid to the
Town of Cicero.
5. Note payable - bank
Note payable - bank consists of a three month unsecured note due June 25,
1997 including interest at 9.75% per annum.
10
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Material Changes in Financial Condition
At March 31, 1997 the Company had working capital of $528,725 derived
primarily from contract sales, as compared to working capital of $465,991 at
September 30, 1996. The Company anticipates that working capital will be
sufficient to meet its working capital requirements for the current year.
Funds will continue to be used for general and administrative purposes,
equipment purchases, equipment manufacturing, travel, marketing and research
and development.
Material Changes in Results of Operations
During the quarter ended March 31, 1997 the Company generated revenues from
contract sales to the City of Oklahoma City, the Hertz Corporation, Berkeley
California, Yonkers NY, Clancy UK, Richmond Virginia and other professional
service contract installations. Oklahoma City, OK and Berkeley, CA each
represented in excess of 5% of total revenues. New clients added to customer
base during this period are Allright Parking, Overtime Parking, Montrose, CO,
George Washington University and Takoma Park, MD.
In January, the Company received a payment of $185,484 from the Town of
Cicero, IL as reimbursement for prepaid ticket revenue to the Town.
Revenues for the 1997 quarter were higher than the prior year's quarter;
however, expenses for the 1997 quarter were higher than the prior year's
quarter. As a result, the Company reported a net profit of $9,974 for the
1997 quarter as compared to net profit of $35,641 for the prior year's
quarter. Revenues, expenses and net profit for the 6 months ended March 1997
were significantly higher than for the prior year due in part to the Cicero
project.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On February 18, 1997 the United States District Court for the District of
Colorado granted Symbol Technologies, Inc. its Motion for Summary Judgement
in the case of Clancy Systems International, Inc. vs Symbol Technologies,
Inc. for alleged patent infringement. The motion was granted on the evidence
that Nippondenso, a company which licensed Clancy's patent in 1992, did not
properly mark their product with the patent number therefore jeopardizing
Clancy's claim. The Company was assessed costs of $2,699.86
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Item 6. Exhibits and Reports on Form 8-K
(b) During the quarter ended June 30, 1996, the Registrant has filed
No reports on Form 8-K.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: May 14, 1997 Clancy Systems International, Inc.
(Registrant)
By: /s/ Stanley J. Wolfson
Stanley J. Wolfson, President
and Chief Executive Officer
By: /s/ Lizabeth M. Wolfson
Lizabeth M. Wolfson, Secretary-
Treasurer and Chief Financial
and Chief Accounting Officer